DaimlerChrysler first quarter operating profit rose 42% year on year to $US1,082m while net income was up just 3.7%.
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“Earnings in both years were negatively affected by substantial expenses relating to Smart,” the German-US automaker noted in its results announcement.
The increase in operating profit of $319m was largely offset by expenses related to the axing of the Smart Forfour model while the ‘realignment’ of the unit’s business model in the prior year had a negative effect on net income of $733m and $622m, respectively.
Earnings per share rose fractionally to $0.35, compared with $0.34 in the first quarter of 2005.
DaimlerChrysler sold 1.15m vehicles worldwide in the first quarter of 2006, up 6% on Q1 2005, while group revenues increased 17% to $45.1bn. Adjusted for exchange-rate effects, revenues rose by 12%.
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By GlobalDataThe automaker’s supervisory board on Thursday authorised the spending of an additional $2.4bn on the implementation of the new management model in the period until 2008. $0.6bn is likely to be accounted for in 2006.
Mercedes sales
The Mercedes Car Group sold 281,500 vehicles in the first quarter of this year, up 14% year on year. First-quarter revenues increased 19%.
But the division reported an operating loss of $823m compared with a $1,158m loss in 2005).
Killing off the Smart forfour cost $1,192m, mainly for compensation payments to contracted suppliers and the valuation of vehicle inventories. Charges of $971m were booked for the ‘realignment of the Smart business model’ in Q1 ‘05.
Earnings in the first quarter of 2006 were also reduced by $246m due to the ongoing staff reduction programme in the Mercedes car group.
Boosted by new models such as the R- and S-class lines, Mercedes-Benz brand unit sales increased 16% to 255,200 vehicles in the first quarter.
Worldwide Smart unit sales were roughly flat at 26,200 but the tiny Fortwo model posted 3% growth in unit sales, not bad for a model first launched some years ago.
A redesigned model will be launched in Europe next year.
Chrysler
Chrysler Group’s first-quarter retail sales increased 4% to 690,700 vehicles helped by new models launched in 2005 such as the Dodge Charger (31,400 units) and the Jeep Commander (20,200). Factory shipments in the first quarter increased 4% to 695,400 vehicles.
Revenues of EUR12.6bn were 17% higher than a year ago. Measured in US dollars, revenues increased 7%.
Difficult market conditions in North America helped explain a drop in operating profit to $144m from $306m in Q1 2005.
Trucks
Truck group unit sales were flat at 119,300 vehicles and, though revenues rose 10% to $9bn, first-quarter operating profit fell to $517m from $847m).
However, last year’s result included income of $335m from the settlement agreement reached with Mitsubishi Motors Corporation related to the expenses incurred for quality measures and recall campaigns at Mitsubishi Fuso Truck and Bus Corporation.
Unit sales in Europe and Latin America decreased 7% while NAFTA sales rose 5% to 50,700 units. Fuso posted unit sales down to 38,700 vehicles from 41,300.
Financial Services
The financial services division increased its first-quarter operating profit from $398m to $544m, helped by lower risk costs, increased volume, positive earnings trend at Toll Collect and the stronger US dollar compared with a year ago. These factors more than offset the negative impact from a higher level of interest rates, DC said.
New business was up 15% to $16.6bn while contract volume was 9% higher at $141.2bn.
Vans and buses
Operating profit for the van, bus and ‘other’ segment increased from $284m to $513m, including income of $284m from the disposal of DaimlerChrysler’s off-highway business to EQT, a Swedish financial investor.
The Mercedes-Benz vans unit boosted sales 16% to 59,700 vehicles worldwide in the first quarter of 2006 while revenues rose to $2.3bn from $1.9bn.
The increase in unit sales was primarily due to significantly stronger demand for medium-sized vans in western Europe and, despite the upcoming model changeover, unit sales of the Sprinter increased 12% to 37,400 units.
Sales of buses and chassis by the brands Mercedes-Benz, Setra and Orion increased by 5% to 7,800 units in the first quarter as revenues rose 15% to $948m.
Outlook
For full-year 2006, DaimlerChrysler anticipates growth similar to that in 2005.
“Whereas market volumes at prior-year levels are the best that can be expected for the United States and Western Europe, demand should increase significantly in almost all of the large emerging economies,” it said.
“Slight growth is expected for Japan. Worldwide demand for commercial vehicles is likely to remain at a high level in 2006. DaimlerChrysler assumes that competitive pressure in the automotive industry will intensify as a result of worldwide overcapacity.”
The automaker expects unit sales for 2006 to be roughly the same as last year – 4.8m vehicles – with a “slight” increase in revenues from 2005’s $181.8bn.
For full-year 2006, it anticipates an improvement in profitability and operating profit to exceed $7.3bn.
